TY  - JOUR
AU  - Fullerton,Don
AU  - Kim,Seung-Rae
TI  - Environmental Investment and Policy with Distortionary Taxes and Endogenous Growth
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12070
PY  - 2006
Y2  - March 2006
UR  - http://www.nber.org/papers/w12070
L1  - http://www.nber.org/papers/w12070.pdf
N1  - Author contact info:
Don Fullerton
Department of Finance
University of Illinois
BIF Box#30 (MC520)
515 East Gregory Drive
Champaign, IL  61820
Tel: 217/244-3621
Fax: 217/244-3102
E-Mail: dfullert@illinois.edu

Seung-Rae Kim
409 Robertson Hall
Woodrow Wison School
Princeton University
Princeton, NJ 08544
E-Mail: srkim@kipf.re.kr
AB  - Recent studies consider public R&D spending that affects abatement knowledge and endogenous growth, distortionary taxes that affect physical and human capital formation, pollution taxes that affect environmental degradation, and regeneration that restores natural capital. Our model combines all of those elements. We show how the combination affects results from each prior model, focusing on two parameters that represent the need for distorting taxes, and the productivity of abatement knowledge relative to pollution. First, either of these two extensions can reverse the prior finding that pollution tax revenue is more than enough to pay for public abatement R&D. Second, tax distortions and externalities substantially alter prior findings that the ratio of public to private capital is based only on output elasticities. Third, our dynamic model affects prior static findings about how other public spending "crowds out" provision of the environmental public good. Fourth, we show whether a greater need for public spending leads to greater increases in the distorting tax or pollution tax. Fifth, while prior research is optimistic that environmental regulation can boost economic growth, we show how it may increase or decrease the growth rate --even if it raises welfare.
ER  -